Tripling Up: Apple, Amazon, Meta Loom as Market Licks Wounds from Fed, Awaits Friday's Jobs Data

Major indexes rebounded early Thursday after yesterday's steep losses following a cautious stance by the Fed that wiped out most hopes of a March rate cut. Apple, Meta Platforms and Amazon earnings loom after the close, followed by the January jobs report first thing Friday.

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Key Takeaways

  • Apple, Amazon, Meta Platforms report after the close, nearly wrapping up mega-cap earnings

  • Rally sapped yesterday by Fed’s caution on potential rate cuts, Powell caution on March

  • Market gears up for tomorrow’s jobs report, with analysts expecting 180,000 positions added

(Thursday market open) Sandwiched between Wednesday’s rally-stalling Federal Reserve meeting and tomorrow’s jobs report, investors prepare to chew on earnings this afternoon from three more mega caps. Buckle up.

Apple (AAPL), Amazon (AMZN), and Meta Platforms (META) are today’s contenders following the market’s lackluster response Wednesday to results from mega caps Alphabet (GOOGL) and Microsoft (MSFT). Major indexes rebounded slightly in premarket trading Thursday from yesterday’s sharp Fed-related losses after a 1.6% January gain for the S&P 500® index (SPX).

Wall Street’s still licking its wounds following post-meeting remarks from Fed Chairman Jerome Powell that effectively pulled the rug out from hopes for a March rate cut. Powell’s words came after a Federal Open Market Committee (FOMC) statement that implied policy makers might wait longer for solid evidence that inflation is truly vanquished. The central bank said it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”

However, the statement wasn’t all bearish. Importantly, it no longer included a long-running clause implying a bias toward tightening. The Fed excluded its prior assertion that another rate hike was possible; instead suggesting a more balanced assessment of the policy path looking ahead.

“Likely most in focus for Fed watchers was the dropping of the tightening bias; along with the fact that, about 35 minutes into the question-and-answer session, Powell mentioned that it is unlikely the Fed will cut rates in March,” said Liz Ann Sonders, chief investment strategist at Schwab. “The Fed has confidence in its policy decisions but needs to see a continuation of better data on inflation.”

On the data front, ISM Manufacturing PMI® bows after this morning’s weekly Initial Jobless Claims. Additionally, today’s calendar features several Treasury auctions, another possible influence on Treasury yields, which remain lower this morning despite the Fed’s cautious stance on possible rate cuts.

The main data event is tomorrow’s 8:30 a.m. ET January NonFarm Payrolls report. Analysts expect moderate job gains of 180,000, down from 216,000 in December, and a slight uptick in unemployment to 3.8%, according to Trading Economics. But wage trends may hold even more meaning as far as interest rates are concerned.

Futures based on the SPX rose 0.3% shortly before the close of overnight trading. Futures based on the Dow Jones Industrial Average® ($DJI) were flat and Nasdaq-100® (NDX) rose 0.47%.

Morning rush

  • The 10-year U.S. Treasury Yield (TNX) fell six basis points to 3.9%, the lowest in nearly a month.
  • The U.S. Dollar Index ($DXY) remained steady at 103.5.
  • The Cboe Volatility Index® (VIX) traded at just above 14, well above January’s lows.
  • WTI Crude Oil (/CL) rose 1% to $76.66 per barrel.

Just in

Weekly Initial Jobless Claims came in above expectations at 224,000 and above the previous four-week average that had been near historic lows just above 200,000. In addition, continuing claims jumped to 1.898 million from the previous week’s 1.833 million. It was the largest rise in claims since mid-August. This could imply that people who lost jobs are having a harder time finding new ones, though one week isn’t a trend.

In another data point this morning, Q4 Preliminary Nonfarm Productivity rose 3.2%, well above consensus, even as Q4 Preliminary Unit Labor Costs rose just 0.5%, well below consensus. Both readings look positive from an interest rate perspective, and Treasury yields extended previous losses shortly after the numbers hit.

Stay tuned at 10 a.m. ET for the ISM manufacturing data. Analysts expect a reading of 47, Trading Economics said, down from 47.4 in December and well under the 50 needed to signal expansion in the U.S. manufacturing economy. If the data show contraction in January, it will be the 15th consecutive month in the red. Keep an eye on the report’s pricing metric, which declined in December. Production also rebounded to expansionary territory that month.

What to watch

Fiesta delayed: At December’s press conference, Powell showed investors glimpses of that elusive rate cut punch bowl. On Wednesday, he said it’s too soon to party.

“Core inflation is still well above target,” Powell said. “We’re encouraged by the progress, but we’re not declaring victory at all at this point. We think we have a ways to go.”

The FOMC, Powell added, “intends to move carefully as we consider when to begin to dial back the restrictive stance that we have in place. … We’re going to be data-dependent, we’re going to be looking at this meeting by meeting.”

The Fed is “looking for a continuation of the good data we’ve been seeing,” Powell said, adding that the Fed is confident, but wants to have even “greater confidence.”

Asked about timing of possible rate cuts, he said, “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen.”

He added that he does expect rate cuts to begin sometime this year. But his language was far more circumspect than in December, after which traders dialed up a more than 70% chance of a cut in March. Chances of a March trim fell to 35% after Wednesday’s Powell remarks. The Fed left its target range between 5.25% and 5.5%. It’s been parked there since July, the last time the FOMC raised rates.

“Notably, the Fed does not see stronger growth as a problem in and of itself; but if the labor market were to weaken, that would argue for starting rate cuts sooner,” Schwab’s Sonders said.  “Given the Fed’s meeting-to-meeting data dependency, we expect volatility around rate cut probabilities to persist.”

Data monitor: Friday’s January Nonfarm Payrolls report is the next touchpoint and wages are a critical element. Wage growth is seen at 4.1% year over year, following December’s 4.1% rise, Trading Economics said.   

Also watch for potential revisions to past reports. So far in 2023 (through the November report), the Bureau of Labor Services has downwardly adjusted each month’s jobs number, with the exception of July. If tomorrow’s January headline integer outshines expectations, scroll down and see if the government reduced previous job growth data. That could temper any reaction to the headline figure.

Stocks in spotlight

Mega-cap earnings accelerate this afternoon as Apple, Meta, and Amazon compete for views on Wall Street. One concern is Chinese demand, especially after companies, including General Motors (GM), reported challenges there this earnings season. Cloud dynamics also come into play when Amazon reports following Alphabet and Microsoft’s tallies in that segment yesterday (see more below).

Apple has suffered four consecutive quarters of year-over-year revenue losses. While the iPhone and services business remain front and center, AAPL’s plans for integrating or introducing AI could be a topic of interest too. Bloomberg recently reported that AAPL plans to add some major generative AI features into products like Siri and Apple Music, though investors might have to wait until AAPL’s June Worldwide Developers Conference for more information.

The iPhone and services businesses will likely grab the spotlight for Apple while Meta investors look for evidence that the company built on recent improvement in digital ad growth. Another focus for Meta is expenses after the company forecasted they’d rise in 2024. Meta shares struggled after its last earnings report when the company said it faced ad challenges in the Middle East.

Other companies reporting today include pharmaceutical giant and $DJI member Merck (MRK), along with grain processor Archer-Daniels-Midland (ADM), industrial conglomerate Honeywell International (HON), and Royal Caribbean Cruises (RCL).

Stocks on the move early Thursday include:

  • Merck shares rose 1% in premarket trading after the company surpassed analysts’ average earnings per share estimate and met revenue estimates. It also guided above consensus for fiscal 2024. In its press release, Merck highlighted solid sales gains for cancer drug Keytruda and the Gardasil vaccine.
  • Honeywell slipped 2% ahead of the open after missing analysts’ consensus for quarterly revenue and providing a revenue outlook that fell short of Wall Street’s expectations. The company cited strength in its commercial aviation business and said it finished strong in an “economically challenging year.”
  • Qualcomm (QCOM) slipped 2% in premarket trading despite a quarter that topped Wall Street’s estimates. Revenue rose double digits for both handsets and automotive chips, possible good news for the smartphone market.

Eye on the Fed

Early today, futures trading pegged chances at 35.5% for the FOMC cutting rates by 25 basis points following the March 19–20 meeting, according to the CME FedWatch Tool. That’s down from 53% immediately before yesterday’s FOMC meeting. The market prices in a 62% chance the funds rate will be a quarter point lower than now after the Fed’s May meeting. 

CHART OF THE DAY: FED METALS: Though both copper (/HG-candlesticks) and gold (/GC-purple line) trended higher recently, both could conceivably come under pressure after the Fed took a more hawkish stance on rates Wednesday. Data source: CME Group.  Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Thinking cap

Ideas to mull as you trade or invest

Fed tea leaves: Two intriguing nuggets from Powell’s press conference got lost in the shuffle. First, the FOMC plans to start discussing next steps on its quantitative tightening (QT) program next month, Powell said. That’s solid evidence it might be looking to slow balance sheet reduction designed to reduce excess liquidity from the banking system and fight inflation. Though reducing QT isn’t as consequential as lowering rates, even a timeline for initial steps might encourage the Treasury market. Second, Powell noted that while Wednesday’s FOMC vote was unanimous, there isn’t complete agreement about how to proceed. “Almost everyone on the committee is in favor of moving rates down this year,” he said at one point. At another, he referred to “a healthy disparity of views,” characterizing that as positive. It’s been many meetings since the FOMC had a non-unanimous vote. Powell’s comments hint that when there’s a rate cut, not every policy maker will necessarily be an “aye.”

Cloud wars: Amazon has a high bar to clear today for Amazon Web Services (AWS) cloud performance after solid outings from both Microsoft and Alphabet Tuesday. Microsoft’s cloud growth appears to be getting a boost from AI and may be gaining share on competitors. AWS growth of 12% in Q3 met Wall Street’s expectations. The quarter includes holiday sales for Amazon’s online retail business, which grew 7% in Q3 after a rough patch earlier in the year. Digital advertising is another metric to watch.

Goodbye, January: Despite yesterday’s retreat, Wall Street just pulled off another sparkling January featuring a 1.6% rise for the SPX. Though it seems like new years often start hot, recent history suggests otherwise. Before 2023 and 2024 January gains, the SPX suffered a string of losing Januarys from 2020 through 2022. That broke a green stretch going back to 2017 after 2016 stumbled out of the gate. The tally from 2016 through 2024 is five winning Januarys out of nine, suggesting market direction to start any year is unpredictable. The “January Effect” which poses that markets tend to rise that month was more a reality in the mid-20th century, and became less predictable since 2000, Bloomberg reported. What about February? History shows it’s among the worst of the year for the SPX, perhaps implying that January parties are often followed by February hangovers. Naturally, past performance isn’t predictive.

Calendar

February 2: January Nonfarm Payrolls, University of Michigan Final January Consumer Sentiment, and expected earnings from AbbVie (ABBV), Aon (AON), Chevron (CVX), and Exxon Mobil (XOM).

February 5: Expected earnings from Tyson Foods (TSN), Caterpillar (CAT), and McDonald’s (MCD).

February 6: Expected earnings from DuPont (DD), Eli Lilly (LLY), Spotify (SPOT), and Ford (F).

February 7: December Consumer Credit and expected earnings from Uber (UBER), Alibaba (BABA), CVS Health (CVS), Bunge (BG), and Yum Brands (YUM).

February 8: Expected earnings from Baxter (BAX), ConocoPhillips (COP), Philip Morris (PM), Ralph Lauren (RL), Zimmer Biomet (ZBH), and Under Armour (UAA).

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

Charles Schwab & Co., Inc. (“Schwab”) and TD Ameritrade, Inc., members SIPC are separate but affiliated subsidiaries of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

Print

Key Takeaways

  • Apple, Amazon, Meta Platforms report after the close, nearly wrapping up mega-cap earnings

  • Rally sapped yesterday by Fed’s caution on potential rate cuts, Powell caution on March

  • Market gears up for tomorrow’s jobs report, with analysts expecting 180,000 positions added

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